In a positive turn of events, the sustainable bond market has experienced a significant rebound in 2024 following a period of stagnation. The International Capital Market Association (ICMA) has welcomed the resurgence, citing “encouraging numbers” for sustainable bond issuance compared to the previous year.
One notable trend observed in 2023 was the allocation of more than half of sustainable bonds to green spending, demonstrating a growing emphasis on environmental initiatives. Additionally, 17% of bonds were dedicated to addressing social responsibility concerns, indicating a broader focus on societal impact.
While sustainability-linked bonds experienced a slight decline from 9% to 7% of total sustainable bonds, the first three months of 2024 saw a remarkable 12% growth in sustainable bond issuance compared to the same period the previous year, reaching $253 billion (€2.6 billion).
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Despite the increase in absolute numbers, sustainable bonds represented a slightly smaller proportion of the wider bond market during the first quarter of 2024, dropping from 12% to 11% of all bonds issued. However, this decline was offset by significant growth in sovereign, supranational, and agency issuances, which accounted for 55% of sustainable bonds, totaling $138 billion—an 18% increase from the same period last year.
Noteworthy developments in the sustainable bond market include Japan’s pioneering entry into the ‘transition’ bond market, marking the first sovereign to tap into this segment. Additionally, the African Development Bank made history by selling the first supranational “sustainable hybrid capital transaction” in alignment with the G20 Capital Adequacy Framework recommendations.
Further diversification of the sustainable bond market was evidenced by the debut of countries like Romania, Iceland, and Ivory Coast, signaling growing global participation in responsible investing. On the corporate front, notable newcomers such as chemicals giant Dow, carmaker Mazda, and tourism firm TUI Group contributed to a 4% increase in corporate deals.
ICMA continues to play a significant role in promoting credible sustainable bond markets through oversight of the Green Bond Principles and other global guidelines for issuers and investors. The resurgence of sustainable bond issuance in 2024 reflects a renewed commitment to responsible investing and underscores the importance of integrating environmental, social, and governance (ESG) considerations into investment decisions.
As the momentum for sustainable finance continues to grow, investors and issuers alike are recognizing the potential for positive impact and long-term value creation. With sustainable bonds gaining traction as a preferred investment vehicle, the stage is set for further innovation and collaboration in the pursuit of a more sustainable future.
